Social Audits and the Transmission of ESG Disclosure Regulations in Supply Chains

Abstract

Social audits help customers to assess the ESG performance of their suppliers to ensure that they are working with sustainable suppliers. I find that suppliers are more likely to employ social audits following their customers’ exposure to ESG disclosure regulations, consistent with the mediating role of social audits in transmitting ESG disclosure regulations in supply chains. This effect is stronger when suppliers have poorer ESG performance or ESG disclosure prior to the regulations, when customers have stronger monitoring incentives, when suppliers possess lower bargaining power against customers and when customers face lower costs to align suppliers. I further find that suppliers which employ social audits experience ESG performance improvement and sales growth. Overall, my findings suggest that social audits work as one mechanism of customers’ monitoring of suppliers’ ESG performance and facilitate the transmission of ESG disclosure regulations in supply chains.

Date of Award	20 Sept 2024
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Xiangang XIN (Supervisor) & Yutao Wang (External Supervisor)